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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 660.19

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4:00 PM EST

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To: stockycd who wrote (3205)	1/2/1999 5:46:00 PM
From: StockOperator	Read Replies (3) of 99985

I hope everyone had a safe and happy New Year! The past couple of weeks I've analyzed the health of this most recent rally by focusing on the weakest segments of the market. My opinion has been that a downturn in the overall market would be the result of these sectors getting weaker. However, if these averages were able to show strength with improving internals, the rally would be much healthier and sustainable. Breaking down the charts of the RUT and Transports I found prices were holding pretty well with subtle upside momentum beginning to build. This past week that momentum has become more obvious. IMHO, all the major averages will see higher prices this month with the small caps possibly have their greatest January ever! Many of the companies I follow have charts poised for huge breakouts. Here are a few things that warrant close observation. The NAZ is running into major resistance. Keep an eye on the high tech generals (CSCO, MSFT, DELL) for breakdown in prices on heavy volume. Be concerned if you see these stocks closing at the END of the trading week at their lows (with heavy volume). The RUT and Transports are very early in their breakouts so momentum should pick up speed here with a big expansion of volume. A weak rally in the RUT should be viewed with concern. I think any short term weakness in the NAZ accompanied by a rally in the Trns. and RUT would be positive for the overall markets. The internets have been a little weak lately, the charts, imo, look bullish. I think this recent weakness has just been an attempt to shake off the weak holders. Two companies to follow this week would be AOL and CYSP. AOl's chart looks incredible bullish. A push into higher ground could be a early sign where this sector is going. CYSP has broken down from its $15.00 support level and hit $10 in two days. Look for a quick turnaround in price with daily volume approaching a million shares. I'm looking for prices to head higher by the end of this week for this sector. Just my opinion. Only the market really knows. Have a great weekend. SO

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